Op-Ed: Why are the presidential candidates ignoring the Federal Reserve?

Washington
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Every 2016 Republican and Democratic presidential candidate is talking about wanting to help the middle class. But then how come none of the White House hopefuls are talking about the culprit behind its demise? The Fed should be the topic of debate.

Donald Trump is talking about building walls. Bernie Sanders is proposing an $18 trillion tax hike. Carly Fiorina is putting forward neo-conservative talking points. Lindsey Graham is fantasizing about bombing every place on planet Earth. Hillary Clinton is doing her best impression of being a robot. But no one, not even Kentucky Senator Rand Paul, is interjecting the United States central bank into the conversation.

In 2008 and 2012, then-Texas Republican Congressman Ron Paul continually lambasted the Federal Reserve throughout debates and brought monetary policy into the consciousness of the general public and mainstream media. Whether or not he was successful in this endeavor shall remain up for debate. But he tried, and this is something he should always be commended for.

Fast forward a few years later, there has only been a single mention of the Fed, and that was during a Bloomberg TV interview with Trump. The real estate billionaire mogul and GOP frontrunner criticized the Fed for expanding a bubble and noted that he would have someone like Paul Volcker succeed Janet Yellen. Volcker aggressively raised interest rates to fight inflation.

OK, not bad. He hasn't said anything about the Fed since then.

Sure, there are still several more months of the Republican primary debates and more than a year away until the general election. However, if you continually purport that your objective for running for the highest office in the land is to help the middle class then you should allude to the Fed and its destructive nature.

Simply changing Fed Chairs won't resort to much because it's the system that needs a complete overhaul. You need to be more explicit about your thoughts regarding central banks.

You are perhaps asking: why should the Fed be entered into the political discourse?

First, going back to the basics of monetary theory, the Fed's booms and busts business cycle is what leads to the crises we witnessed in 2008. And when the government and central banks intervene in order to circumvent a correction then you have a collapse on your hands. Markets need corrections, but they can't correct when the supposed smartest men in the room try to throw everything at it except the kitchen sink. Well, the kitchen sink, too.

Second, the Fed's inflationary expansion of the money supply over the past few years will inevitably lead to exorbitant price inflation — we're already seeing multiple pockets of the U.S. economy experiencing price inflation. The freshly created money and credit expansion ultimately helps the often vilified one percent and Wall Street bankers, and as the money funnels throughout the economy then the middle- and low-income earners have a reduced purchasing power. Moreover, the zero interest rate policy (ZIRP) artificially maintained by Yellen and Co. hurts retirees, seniors and savers, while benefiting the speculators and billionaires and millionaires like Trump.

The $4 trillion balance sheet will not come with a happy ending. Monetizing the debt (printing new currency to pay off bonds and debts that are coming due) will only hurt the very people that politicians claim they want to come to their rescue. It's like the old saying, "The most dangerous words in the English language are 'Hi, I'm from the government and I'm here to help.'"

Fed officials are intentionally deceiving the general public, and this tommyrot process of selling Treasury debt to dealers and buying back those bonds just exacerbates the current fiscal ineptness clouding Washington. The Fed purchasing U.S. government debt in perpetuity won't solve the Social Security insolvency, the inequity between high and low-income earners or the complicated tax code.

The upcoming crash wouldn't be so bad, or perhaps even transpire, if the Fed just sat back a few years ago and allowed the liquidation of all that malinvestment and the purging of bad investments. At least this would have brought back a sound production structure.